Promises Promises

Δημοσιεύτηκε: Μαϊ 15 , 2014
Συγγραφέας: Stephen White

On Wednesday Roger Boyes, the Diplomatic Editor of the London
Times, wrote an op-ed piece critical of the West’s approach to the
Iranian nuclear situation. You can read the full article
here. In summary his view is that during the current
negotiations Iranian President Rouhani may be making all the right
noises about the lack of intent to build a nuclear bomb, but
because he is a transient figure on the Iranian political scene,
Boyes suggests that unless there is an agreement to international
monitoring of the Revolutionary Guard, which is the stronger and
more permanent force in Iranian politics and which controls the
Iranian nuclear programme, then promises made so far will be
worthless. As a result Iran will achieve a nuclear bomb and the
world will be powerless to do anything about it in retrospect.

On Wednesday it was reported that Martin Lidegaard, Danish
Foreign Minister, had urged the Syrian government to expedite the
handover of chemical weapons promised as part of the negotiated
agreement made by Syria last year to remove all chemical weapons on
a defined timetable. You can read a Reuters report
here. Syria has already missed several interim deadlines
for relinquishing their stockpile, and although 92% of their
chemical weapons have now been accounted for there are worrying
discrepancies in their inventory. The deal requires the process to
be completed by June 30th, but the general view is that
this deadline will also be missed. The Danes are involved because
one of their ships is due to take delivery of the chemicals, but
the Syrians have prevaricated in handing them over and the ship is
now stuck in the Eastern Mediterranean waiting for its cargo.

On Wednesday, during Prime Minister’s Questions in Parliament in
London, there was much angry argument about the value of assurances
made the previous day by Ian Read, CEO of the pharmaceutical giant
Pfizer, that if their negotiations to take over Astra Zeneca are
successful there was no plan to lose jobs and R&D in the UK.
Pfizer have a poor track record in this regard; in addition when
Kraft Foods were negotiating to acquire Cadbury in 2010 assurances
were made to the UK Government during the negotiations that a
Cadbury factory near Bristol would be protected, but within a week
of the acquisition being completed Kraft announced that the factory
would close, with the loss of 400 jobs.

What is the value of a promise or an assurance in a commercial
negotiation? Of course there are differences in different cultures;
if a supplier in Germany promises to deliver by a certain date then
that is treated as a firm commitment, and only a catastrophe will
stop it from happening. In some Southern European countries a
promise is more like an aspiration – there is hope and enthusiasm,
but a lower expectation on either side that it will actually
happen.

The simple expedient to ensure that a promise will be kept is to
put a price on the breach, normally a sanction or a price penalty.
But in a commercial relationship (as well as in the political
relationships in the examples given above) implementing the
sanction can be suicidal.

I once agreed a rebate scheme with a client based on the
client’s assurances of volumes given at the beginning of the
contract. When the promised volumes were not achieved we refused to
pay the rebate; the client went bonkers and threatened to terminate
the relationship. We were legally and morally in the right, but in
a practical sense in deep trouble. We eventually cut a deal whereby
we paid the rebate but the scheme for the following year had to
make up the shortfall before we started counting.

I have to go now – I promised my wife I will fix a dripping tap
in the bathroom. It has been dripping for many years; and I have
made many promises……but we are still married.